Agenda and draft minutes

Pension Board
Wednesday, 5th December, 2018 9.30 am

Venue: Civic Offices, St Nicholas Way, Sutton, SM1 1EA

Contact: Sharon Major, Committee Services Officer  Tel.: 020 8770 4990, Email:  committeeservices@sutton.gov.uk

Items
No. Item

12.

Apologies for absence

Minutes:

Apologies were received from Andrew Theobald and Tracey Burnley, Trevor Harris was also absent.

 

13.

Declarations of interest

Minutes:

There were no declarations of interest.

14.

Member Development - National Developments

To cover national developments including pensions taxation, lifetime ISAs, auto-enrolment, reminder of cost cap and any other developments, as provided by Anne Marie Allen from Barnett Waddingham.

 

Minutes:

Anne Marie Allen from Barnett Waddingham, gave a presentation which covered national developments. The discussion specifically covered:

·         Cost Cap Principles, including the LGPS Scheme Advisory Board Future Service Cost Cap and HMT Employer Cost Cap.

·         Pension Tax

·         Annual Allowance

·         Lifetime Allowance

·         Lifetime ISA (LISA)

·         Auto Enrolment

·         General Development.

 

15.

Minutes of the Previous Meeting pdf icon PDF 80 KB

To approve as a correct record the Minutes of the meeting held on 04 July 2018.

Minutes:

RESOLVED: that the minutes of the meeting held on 4 July 2018 be agreed as a correct record, and were signed by the chair.

16.

Quarterly Investment Performance Report - To September 2018 pdf icon PDF 119 KB

The Pension Committee, at its meeting on 19 November, received a report on the investment performance of the Pension Fund managers as at 30 September 2018.

 

See: Pension Administration Update Report, Pension Committee,
19 November 2018 (p.21-38)

Minutes:

Lyndsey Gamble, Head of Investment, Risk and Commercial Finance, presented the report prepared on 19 November for pension Committee which provided an update on the performance of the Pension Fund investment managers for the quarter ending 30 September 2018, performance in the last twelve months, annualised rolling three year performance against target benchmark and performance since inception.

Members commented that the performance of Newton had improved. The Chair queried the performance of M&G and Partners Group and the reasons behind this.  The Head of Investment, Risk and Commercial Finance, commented that this was due to three capital calls affecting the performance results in the period. Michael Curran queried the Bond performance and The Head of Investment, Risk and Commercial Finance advised that she will look into performance and revert to the Board.

RESOLVED: that the performance of the Sutton Pension Fund investments be noted.

17.

Order of items

Minutes:

The Chair Mike Ellsmore announced that he would reorder the agenda and hear item 16 next ahead of item 6, as it leads on from the quarterly investment update.

 

18.

Exclusion of the Press and Public

The following motion should be moved, seconded and approved if the committee wishes to exclude the press and public to deal with reports revealing exempt information:

 

“That the public be excluded from the meeting for the following items of business on the grounds that they involve the likely disclosure of exempt information as defined in paragraph 3 Schedule 12A of the Local Government Act 1972.”

Minutes:

Mike Ellsmore  motioned that the public be excluded from the meeting for the following item of business on Brexit Implications and Strategy Next Steps on the grounds that it involve the likely disclosure of exempt information as defined in paragraph 3 Schedule 12A of the Local Government Act 1972.

This was seconded by Michael Curran,

RESOLVED: That the public be excluded from the meeting for the following items of business on Brexit Implications and Strategy Next Steps on the grounds that they involve the likely disclosure of exempt information as defined in paragraph 3 Schedule 12A of the Local Government Act 1972.

 

19.

Brexit Implications and Strategy Next Steps pdf icon PDF 112 KB

The Pension Committee, at its meeting on 19 November, received an exempt report on Brexit Scenarios and Strategy Next Steps.  This report and appendix is being circulated to the Pension Board for information.

 

Minutes:

Lyndsey Gamble, Head of Investment, Risk and Commercial Finance presented the report which was prepared by Hymans Robertson LLP.

 

The Chair asked about timing of the implementation of the investments strategy recommendations and what percentage of the fund is involved.  The officer responded accordingly.

 

RESOLVED: that

1. The content of this report was noted

2. The likely impacts of a range of Brexit scenarios on the Pension Fund and the recommendations by Hymans Robertson regarding the Pension Fund investment strategy was noted.

 

20.

Pension Administration Update pdf icon PDF 102 KB

The Pension Committee, at its meeting on 19 November 2018, received a pension administration update report. That report is presented to the Board for noting.

 

See: Pension Administration Update Report, Pension Committee,
19 November 2018 (p.9-20)

Minutes:

David Kellond, Pensions Administration Manager presented the report. He highlighted to the board the issue of the annual returns.  He confirmed that for 12 schools all using the same payroll provider the annual benefit statements were not completed in time and this was reported to the pension regulator.

 

A fine for late provision of this information were passed to the schools. He spoke through the changes that had been made as a result of this issue and the mitigating actions that have been put in place to avoid this in future.

 

An update on Pension online was provided. It was confirmed that for active members information has been sent to encourage registration.  The number of registered users is currently to 4583, it was confirmed this is about 20% of members.

 

Based on these figures the Chair commented that if only 1 in 5 members are registered to be able to look at their  benefit statement that is disappointing. He raised a concern that it could leave the scheme open to challenge if people subsequently raise issues on their benefits.

 

The Pensions Administration Manager spoke about how the online service had been promoted and the improvements to online help which has been made available. He advised the last mailing to deferred members was in October 2018 telling them about pensions online and explaining that there is no longer a paper statement showing annual benefits entitlement.

 

Angela Russell asked about active members and she highlighted that she was not aware of pensions online at all. The Pensions Administration Manager responded  that the information was sent to the pensions contacts on record.  He will confirm the contact point on record to Angela Russell so that it can be checked if this is still the correct person to share information with regarding the scheme.

 

Chris Reeve advised that he looked online and his 2017 statement was available but 2018 was not available on line as at 1 September, however he confirmed this is now available.  

 

The Pensions Administration Manager gave an update on the volume of  work outstanding.  He advised there is work being done to get more resource and to increase the size of the administration team.  Michael Curran asked how many extra staff would be recruited as he commented that there had been resourcing issues for some time. He requested that the number of people (FTE) employed in the Pension Administration team should be reported in each admin report so this could be tracked. The Pension Administration Manager agreed that this would be included going forward. The board then reviewed the Key performance indicators. The Members requested that the data scores for the TPR and the Pension Administration Manager agreed to provide these directly to Members by email.  

 

RESOLVED: that the pension administration report be noted

 

21.

Pensions Administration Strategy Review pdf icon PDF 99 KB

At the meeting of the Pension Board on 10 January 2018, the Board were informed a Final version of the PAS (Appendix A) would be presented in September 2018. It was agreed with the permission of the Chair to delay presenting the document to the Board until the December 2018 meeting.     This report is to provide a final copy of the Pension Administration Strategy issued to employers in February 2018.

Additional documents:

Minutes:

David Kellond, Pensions Administration Manager presented the Pension Admin Strategy which was finalised in Dec 2017.  He advised the Board that the Administration strategy is helpful when liaising with employers and explaining what data is required. It also helps to highlight the services that Sutton can provide to them.

 

RESOLVED: that the final version of the Pension Administration Strategy issued to scheme employers be noted.

 

22.

Government Actuary Department (GAD) Section 13 Report pdf icon PDF 113 KB

The Pension Committee, at its meeting on 19 November, received a report on the Government Actuary Department (GAD) Section 13 Report. London Borough of Sutton Pension Fund received a Green Flag in all four measures in the GAD Section 13 review of the actuarial valuations of Local Government Pension Scheme (LGPS) Funds in England and Wales as at 31 March 2016.

 

See: Pension Administration Update Report, Pension Committee,
19 November 2018 (p.39-44)

Minutes:

Lyndsey Gamble, Head of Investment, Risk and Commercial Finance presented the report, on the Government Actuary Department (GAD) Section 13 report.  She highlighted  that Sutton had received a Green flag rating on all four measures. The Board were also advised that  GAD apply some assumptions against valuations and under these assumptions the funding level moved up from 80% to 86% showing a prudent approach to actuarial assessment at that date.

 

The Chair commented that he was pleased with overall funding levels and that they have improved further since the report, he was also pleased with the 4 green flag ratings.

 

RESOLVED: that

 

1.  The content of this report was noted

 

2.  That Sutton Pension Fund received Green Flags for all four statutory measures - compliance, consistency, solvency and long-term cost efficiency, was noted.

3. That at the national level, the LGPS is in good financial health, was noted.

4.  That all four firms who provide actuarial advice to LGPS Funds have given feedback on areas where they believe GAD’s approach could be improved to make the report as relevant and as helpful as possible for the LGPS was noted.

 

23.

Interim Valuation pdf icon PDF 110 KB

The Pension Committee, at its meeting on 26 September, received a report on the interim valuation of the Pension Fund as at 31 March 2018.  This report is being circulated to the Pension Board for information.

 

Additional documents:

Minutes:

Lyndsey Gamble, Head of Investment, Risk and Commercial Finance, presented the report prepared on 26 September for Pension Committee.

 

She advised the Board that the overall interim valuation results increase from 80% to 92% at that point in time, and overall value of assets had increased significantly.  She pointed out that this should be seen as a helpful guide but for the Board to bear in mind this not a full valuation. 

 

RESOLVED: that

 

1. The outcome of the roll-forward Pension Fund valuation as at 31 March 2018, was noted.

 

2. This report in conjunction with the separate report to this Board titled “Update on Pensions Landscape” was considered and noted.

 

24.

Pension Fund Annual Report & Accounts pdf icon PDF 114 KB

The Pension Committee, at its meeting on 26 September, received a report on the Pension Fund Annual Report and Accounts 2017/18.

 

See: Pension Administration Update Report, Pension Committee,
26 September 2018 (p.25-130)

Minutes:

Lyndsey Gamble, Head of Investment, Risk and Commercial Finance, presented the report  She highlighted that the Annual accounts were audited by Grant Thornton and had received an unqualified opinion.  

 

The Chair commented that this is a good outcome and also that it was pleasing to see a positive cash flow position. Head of Investment, Risk and Commercial Finance mentioned that based on recent modeling there could be a cash flow negative in near future and that if that were the case actions could be taken to look to reverse that.

 

RESOLVED: that

 

1. The audited Pension Fund Annual Report and Accounts 2017/18 and appendices, was noted

 

2. It was noted that the Committee approved the audited Pension Fund annual report and Statement of Accounts for 2017/18 including the Governance Compliance Statement at Appendix III of the Annual Report.

3. It was noted that the Committee agreed to delegate authority to the Strategic Director - Resources, to make the required amendments and arrangement for publication of the Pension Fund Annual Report 2017/18 by no later than the statutory 1 December 2018 deadline.

 

25.

Grant Thornton External Audit Report pdf icon PDF 107 KB

The London Borough of Sutton Pension Fund received unqualified financial audit certificate from Grant Thornton UK LLP, the statutory appointed auditor in respect of the Annual Report and Accounts 2017/18.  The Independent auditor’s report is attached at Appendix A.

Additional documents:

Minutes:

Lyndsey Gamble, Head of Investment, Risk and Commercial Finance, presented the report.  There were no questions raised regarding this item.

 

RESOLVED: that

1. The content of this report and appendix be noted

 

2. The Sutton Pension Fund received unqualified financial audit certificate for the Annual Report and Accounts 2017/18 be noted.

3. It was noted that this report is related to the separate report to this Board titled “Pension Fund Annual Report and Accounts - 2017/18” and members of the Board are asked to read this report in conjunction with the other report.

 

26.

London CIV Update pdf icon PDF 129 KB

The Government require local authorities to pool pension fund investments and the London Borough of Sutton Pension Fund is doing so where possible through the London Collective Investment Vehicle (London CIV).  The Pension Committee, at its meeting on 26 September, received a presentation from a representative of the London CIV.

Minutes:

Lyndsey Gamble, Head of Investment, Risk and Commercial Finance, presented the report

She spoke through the key areas of the London CIV update and in particular highlighted the changes to the governance arrangements.  The Board were advised that  total savings generated by the CIV now are more than the costs. The board were further advised that for Sutton 41% of assets are now pooled.

 

The CIV have now published a responsible investment policy.  The Pension Committee are now looking at this policy, and a development session to look at this in more detail is due in February next year to look at options for Sutton Pension Committee to consider.

 

Members commented that it appears that the CIV is starting to deliver real savings.

 

RESOLVED: that

 

1. The key points of the London CIV presentation to the Pension Committee on 26 September 2018, were noted

2. The recent developments at London CIV outlined in this report were noted

3. It be noted that the Council has served the required notice on the London CIV that the Council:

·         revokes its delegation of the joint discharge of the relevant functions to the Pensions CIV Joint Committee (PCSJC).

·         accepts and agrees the new proposed governance arrangements for the London CIV.

·         supports the dissolution of the PCSJC and the making of appointments to the new Shareholders Committee and additional non-executive and treasurer appointments to the Board.

 

27.

Update on Pensions Landscape pdf icon PDF 128 KB

The Public Service Pension Schemes (PSPS) environment continues to evolve for a variety of reasons with consequences for the Local Government Pension Scheme (LGPS).

 

This report provides an overview of recent key developments including; actuarial valuation of PSPS, the LGPS Scheme Advisory Board (SAB) Separation Project and SAB review of LGPS third tier employers. The report considers the likely implications for the LGPS and it is aimed at the Pension Board for information.

Minutes:

Lyndsey Gamble, Head of Investment, Risk and Commercial Finance, presented the report

which gave an overview of recent key developments including; actuarial valuation of PSPS, the LGPS Scheme Advisory Board (SAB) Separation Project and SAB review of LGPS third tier employers. The report considered the likely implications for the LGPS. The key points highlighted were the proposed four yearly valuations and the separation project. This project is looking at if LGPS should be separated from Administering Authority and two options are being looked at, these being option one,  to ring fence or option two to look at the creation of a completely separate entity to hold the pension funds within.

 

RESOLVED: thatthe content of this report be noted

 

28.

Review of Risk Register pdf icon PDF 119 KB

This report presents the Sutton Pension Fund Risk Register as included in Appendix A and invites the Board’s comments.

Additional documents:

Minutes:

Lyndsey Gamble, Head of Investment, Risk and Commercial Finance, presented the report and highlighted the details within appendix A

 

The Board were made aware of the addition of a new risk on cyber security.  Whilst the full register was presented to the board, going forward the presentation will cover elements of note only.

 

Members commented on risks that are rated as red.  The Chair asked about covenant risk, he pointed out that with the growth of number of employers this risk is now higher.  The Head of Investment, Risk and Commercial Finance commented that within the fund, Sutton have a key group of employers that were previously part of the council and where close contact is still maintained. The Board were advised that going forward the register will come to the board on a quarterly basis.

 

RESOLVED: thatthe Sutton Pension Fund Risk Register be reviewed and noted.

 

29.

Additional Voluntary Contribution Review pdf icon PDF 101 KB

The purpose of this report is to present the findings of the review of the Additional Voluntary Contribution (AVC) arrangements of the London Borough of Sutton Pension Fund, carried out by Barnett Waddingham LLP (Appendix A).  

Additional documents:

Minutes:

David Kellond, Pensions Administration Manager presented the report on the findings of the review of the Additional Voluntary Contribution (AVC) arrangements which was carried out by Barnett Waddingham LLP.

 

The Pensions Administration Manager highlighted the issues identified and also the actions which will be taken to mitigate these issues, in particular he spoke about inviting AVC contributors to review their selection of funds, and about the promotion of AVC’s  to Members. Consideration given to invite ACV providers to put on workshops for scheme members. This would help to promote the existence of AVC ‘s and the benefits of these 

 

The Chair commented that communication on this is key to raise awareness and also to  encouraging people to review their fund decisions and look at performance of funds on a regular basis.

 

Members commented that there is a good broad range of funds.  Chris Reeve commented that tax advisors had been in contact regarding promoting shared cost AVC schemes which could be another option for individuals to consider.  

 

RESOLVED: thatthe content of this report was noted and the proposed actions were considered

 

30.

Review of Work Programme pdf icon PDF 113 KB

This report discusses the proposed work programme for the Board for the reminder of financial year 2018-19 and into 2019/20.

 

 

See: Pension Administration Update Report, Pension Committee,
19 November 2018 (p.235-238)

Minutes:

Lyndsey Gamble, Head of Investment, Risk and Commercial Finance  presented the report to highlight the proposed work programme to the Board for the year 2018-19 and into 2019-20.

 

Members discussed a number of additions to the programme including:

 

Addition of the investment strategy review and the ESG for the April meeting

A Presentation on the interim actuarial valuation would be welcome after January 2019

The Board would like to be invited to training events held for the Pension committee

The Board would like to be updated on the cost cap impact of any changes proposed and also on any benefit changes the date for this to come to the board is to be confirmed.

 

RESOLVED: that the work programme for the Board for the coming year be agreed.

 

31.

Any Urgent Business

The Chair must approve the reason for urgency.

Minutes:

There was no urgent business.

 

32.

Date of Next Meeting

Minutes:

The next meeting will take place on 3 April 2019.